Contactless Payments Gain Ground

Refining a process to be more efficient is a goal of almost all endeavors. From the ordered brilliance of McDonalds food production process to saving time doing household chores, saving time by refining small steps can influence the greater whole. Recently, the idea of contactless payments has been gaining traction in the United States – by eliminating the card shuffle at the point of purchase, some businesses are shaving small amounts off of the transaction time- and reaping big rewards.

Contactless is not a brand new technology – it has been in use in some forms for some time- Mobil’s PayPass is one example, and the Massachusetts Turnpike has been using EZPass for years. These are not the true contactless experience that will be provided by the big associations, but do provide a good view that consumers will accept the technology and that the base idea is a sound one.

One of the more obvious verticals that benefit from contactless payments is the fast food industry- the name alone implies speed. With low average tickets and a high volume of card present transactions, it is the obvious choice to benefit from contactless technology. Other businesses that are known to have been playing around with contactless payments include WalMart, Walgreens, CVS, 7 Eleven. The big chains that do high volume have always been more open to spending money in order to attempt an increase in efficiency.

Adoption of contactless in other businesses is not gaining as quickly as hoped. There are a number of contributing factors to the adoption rate that have kept the numbers down. Businesses that have existing equipment may have to replace it with more capable devices, and the additional cost may not be covered by additional business in lower volume environments. On the other side of the transaction, many consumers have not been issued a card that contains an RF chip yet. A recent study undertaken by Smart Card Alliance has shown that about nine percent of the U.S. population now has a contactless credit or debit card. As cards expire and new cards are issued, the number of contactless enabled cards will continue to increase.

Contactless payments uses radio frequency identification technology to transfer data between the card (which contains the card information on a smart chip embedded in the card) and the RFID equipped card reader, which identifies the data by just waving the card from a certain distance. The adoption of RFID by manufacturing and warehouse operations has been in play for some time, and has been openly adopted. RFID enabled credit cards use a more secure design for the chip, as opposed to the cheap tags used for inventory and product tracking.

One emerging implementation is embedding the chip into a consumer’s cell phone. The market penetration of cell phones is ubiquitous at this point, and many will not leave the house without one. Other interesting ideas in play include wireless passports and driver’s licenses – although some privacy experts are strongly opposed to such integrations.

The emergence of contactless payments cannot be denied. As more and more cards support the technology, and equipment manufacturers include the ability to read the RFID cards, the adoption and everyday use of near-field communications in the small ticket, high volume marketplace will become a fact of life.